OIC reports companies score well in recent stress test

OIC reports companies score well in recent stress test

A stress test of local insurance companies has showed their solid financial position with high capital adequacy ratios (CAR) to cushion against the country's economic downturn, according to Office of the Insurance Commission (OIC).

Life insurance companies' CAR could decline significantly if economic growth slumps, but their average levels remain nearly twice the regulator's minimum requirement of 120%, said Chayanin Kerdpholngarm, assistant secretary-general of OIC.

OIC recently requested all life assurance companies and the country's top 20 non-life insurance firms by healthcare premiums join the stress test, of which 17 out of 23 life insurers and 19 of the top 20 non-life insurance firms submitted complete financial data.

For non-life insurers, their CAR would fall modestly to twice the regulator's requirement even if the country's economic slowdown leads to a decline in new business premiums, as the required reserves will also decrease.

"We're not worried about their financial strengthen as both life and non-life insurance firms are able to maintain their capital," she said.

At the end of September last year, the average CAR ratio of life assurance companies was 283% and non-life assurance companies was 400%.

Ms Chayanin said the tested parameters for the Covid-19 crisis comprised two steps of risks, the insurance business and macroeconomic risks.

"Regarding the business risks, OIC set up a simulation-based hypothesis with assumptions that the mortality and the hospitalisation expense claims surge significantly," she said.

For macroeconomic factors, Ms Chayanin said the simulation has been made based on assumptions that the country's economic growth shrinks, inflation turns negative, the government bond yield is similar to foreign countries', and prices of equities and real estate weaken.

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